2025 AP Macroeconomics Free-Response Questions
Advanced PlacementAP MacroeconomicsEconomicsFree Response
3 questions20 pts
3 gradable20 rubric criteria0 dependencies
q1Question 1
q1
Question 1
1. Assume that the economy of Vortania is in long-run equilibrium. A. Draw a correctly labeled graph of the short-run and long-run Phillips curves for the economy of Vortania, and label the long-run equilibrium point as P. B. Assume that new residential construction projects are being implemented in Vortania. i. Will real output in Vortania increase, decrease, or remain the same in the short run? Explain. ii. Assuming no change in inflationary expectations, on your graph in part A, show the short-run effect of the new residential construction projects on Vortania's economy, labeling the new short-run equilibrium point as S. C. Vortania and Rhodara are trading partners with flexible exchange rates. The currency of Vortania is the Vortanian crown (VTC), and the currency of Rhodara is the Rhodaran mark (RHM). Assume that Vortania's capital and financial account (CFA) balance is zero. Now assume that Vortania imposes new tariffs on imports from Rhodara. Draw a correctly labeled graph of the foreign exchange market for the Vortanian crown, and show the effect of the tariffs on the SUPPLY of the Vortanian crown and the international value of the Vortanian crown. D. Based solely on the change in the international value of the Vortanian crown shown in part C, will Vortania's net exports increase, decrease, or remain the same in the short run? E. Based on the change in net exports identified in part D, what will happen to each of the following in the short run? i. The capital and financial account (CFA) balance in Vortania. Explain. ii. Employment in Vortania F. Assume the central bank of Vortania wants to return the Vortanian crown to its international value before the imposition of the tariffs. Would the central bank buy or sell Vortanian crowns in the foreign exchange market? Explain.
Rubric Criteria (10)
C1Draw a correctly labeled graph of the short-run Phillips curve (SRPC).
1.0000pts
C2The graph must include a correctly labeled long-run Phillips curve (LRPC) and show a point labeled P at the intersection of the short-run and long-run Phillips curves.
1.0000pts
C3State that real output will increase and explain that the new residential construction projects increase investment spending, which increases aggregate demand.
1.0000pts
C4On the graph from part A, show a point labeled S on the SRPC to the left of point P.
1.0000pts
C5Draw a correctly labeled graph of the foreign exchange market for the Vortanian crown.
1.0000pts
C6The graph must show a leftward shift in the supply curve of the Vortanian crown, resulting in an appreciation of the Vortanian crown.
1.0000pts
C7State that Vortania’s net exports will decrease.
1.0000pts
C8State that the capital and financial account (CFA) balance in Vortania will move into surplus and explain that the current account (CA) moved into deficit and the balance of payments must balance (CA+CFA=0).
1.0000pts
C9State that employment in Vortania will decrease.
1.0000pts
C10State that the central bank of Vortania would sell Vortanian crowns in the foreign exchange market and explain that the increased supply of the Vortanian crown will cause it to depreciate.
1.0000pts
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